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Update on the New #Conglomerates

My blog on the New Conglomerates has proven to be one of the most popular I have written. I’d been contemplating an update for a while, even before I heard this week’s announcement that Verizon is buying the bulk of Yahoo!. Talk about being prescient…. So, just over two years later, it feels very timely to return to the topic.

Of the so-called FANG tech stocks, when I was writing back in May 2014, Facebook had recently acquired WhatsApp and Oculus VR. However, apart from merging Beats Music into its own music service, Apple has not made any big name deals, but has made a number of strategic tech acquisitions. Meanwhile, Amazon has attempted to consolidate its investment in delivery company, Colis Privé, but got knocked back by the French competition regulators. Netflix finally launched in Australia in March 2015, and within 9 months had 2.7 million customers, a growth rate of 30% per month. Finally, Google has since renamed itself Alphabet, and purchased AI business Deep Mind.

Over the same period, Microsoft appears to have reinvigorated its strategy: back in May 2014, Microsoft had just completed its acquisition of Nokia. Since then, Microsoft has announced it is buying LinkedIn (following the latter’s purchase of Lynda.com in 2015), but has also shut down Yammer, which it had only bought in 2012. The acquisition of LinkedIn has been framed as a way to embed corporate, business and professional customers for its desktop and cloud-based productivity tools (and maybe give a boost to its hybrid tablet/laptop PCs). On the other hand, Microsoft has a terrible track record with content-based products and services, as evidenced by the Encarta fiasco, and the fact that Bing is an also-ran search engine. I think the jury is still out on what this transaction will really mean for LinkedIn’s paying customers.

So, what are the big tech themes, and where are the New Conglomerates competing with each other?

First, despite being the “next big thing”, VR/AR is still some way off being fully mainstream (although Pokémon GO may change that….). Apple and Google will continue to go head-to-head in this space.

Second, content streaming is not yet the new “rivers of gold” for publishing (and the sale of Yahoo! might confirm that there’s still gold in those advertising hills….). But music streaming (Apple, Spotify, Amazon and Google – plus niche services such as Bandcamp and Mixcloud) is gaining traction, and Amazon is building more content for SVOD (to compete with Netflix, Apple and Google). But quality public broadcasters such as BBC, ABC and NPR are making great strides into audio streaming (via native apps and platforms like TuneIn) and podcasting. One issue that remains is the fact that digital downloads and streaming still suffer from geo-blocking, and erratic pricing models.

Third, Amazon continues to build out its on-line retail empire, even launching private label groceries. Amazon will also put more of a squeeze on eBay, which does not offer fulfillment, distribution or logistics and is a less attractive platform for local used-goods sellers compared to say, Gumtree.

Fourth, Amazon is making a play for the Internet of Things (which, for this discussion, includes drones), but both Apple and Google, via their hardware devices, OS capabilities and cloud services, will doubtless give Amazon a run for its money. Also, watch for how Blockchain will impact this sector.